Your Bali Property Blogspot

There are two common types of property ownership in Indonesia – Leasehold titles and freehold titles. Sometimes, it’s confusing to understand leasehold vs freehold for individuals who want to start their property investment journey, as laws and regulations need to followed and considered when making any property investment plans.   In this article, we’ll learn what are the differences between leasehold and freehold, and the pros and cons. Let’s get started!   Leasehold vs Freehold – The Definitions In order to understand the difference between leasehold titles and freehold titles, it’s essential to know about the definition of leasehold and freehold. Let’s explore these definitions.   - Leasehold: A title that gives you the right to lease a property after having a deal with the lessor for a certain period of time as agreed to. - Freehold: The highest title that you possibly have. You can have this title through Hak Guna Bangunan or Hak Pakai. But, not for Hak Milik.   Leasehold Title Leasehold title lets you generate money through property investment in Indonesia.   You can have a leasehold title for a certain period of time. It means you won’t have the title permanently. The duration of leasehold rights is usually set up for 25 to 80 years, depending on your agreement with the lessor/landlord, or the contract that you purchase from a current lessee.   Some leases can be much shorter, but keep in mind that there are extensions based on land value at the time the contract expires.   This kind of title allows you to have the option to extend your lease period, preferably closer to the expiration date of the current lease. This property investment option is open for non-Indonesian individuals and legal entities (PT. PMA).   All you need to know about leasehold rights are completely explained in our article titled “Leasehold in Bali: A Pocket Guide for Foreigners”. Click here to access the article!   Freehold Title Freehold titles have a higher hierarchy than leasehold titles. If you have freehold titles, it means you can use your property for any purpose.   Sometimes, there’s a misunderstanding about freehold rights in Indonesia. Many people think that foreigners have a zero chance to buy freehold rights.   However, both non-Indonesian individuals and legal entities like PT. PMA can have the title if they want. Freehold rights like Hak Pakai and Hak Guna Bangunan are accessible to foreigners. Whereas, freehold rights like Hak Milik are for Indonesian citizens only.   Learn more about freehold titles, here!   Leasehold vs Freehold – Pros and Cons Now, you’re expected to have insights into both leasehold and freehold rights. This will make it more straightforward and easier for you to know what are the pros and cons when comparing leasehold vs freehold.   1. Leasehold   Pros - Less expensive – If you want to have a property through leasehold rights, it will be cheaper than the freehold titles. - More leasehold villas are available in Bali than freehold titles as Bali is very rich in foreign investors. - Newer built villas are available to leasehold clients, with larger land areas than freehold titles. - Some of the most in demand areas in Bali with great commercial real estate properties offers investors a great return on their leasehold investments with a staggering 5 Year payback period. – For more information on leasehold commercial real estate, our property agent would be able to run you through the best of the best in each location.   Cons - More limitations – Leasehold rights ownership doesn’t “own” the land. - Ownership – The rights holder is not the owner of the property. - You’ve to always make sure that should you wish to run the property as a rental business. You‘ll need to make sure that the property is in the correct zoning that allows you to obtain or have a “pondok wisata” license for daily rentals.   2. Freehold   Pros - More authorities – You’ll have more flexibility to control the property, such as doing renovation for building improvements. - Business – The holder of this rights has access to run a business through Hak Guna Bangunan should the land zoning permit you to do so. - Greater resale value as freehold titles have a steady incline.   Cons - More expensive – If you compare it to leasehold title, the freehold is more expensive. - Fewer freehold properties available in investment areas. - Most freehold properties are older than leasehold villas.   When you’re comparing leasehold vs freehold, there are pros and cons between them. Now, it’s up to you which one is better or more suitable for your needs.   Let’s Make a Right Choice! Knowing the definition, pros, and cons when comparing leasehold vs freehold helps you to have a deep understanding of those property ownership titles in Indonesia.   As the pros and cons we’ve pointed out previously, it’s your turn to choose your dream title wisely. Make a choice that fits your needs and goals of having property in Indonesia.

There are two common property ownerships you should know about as a foreigner – one is the leasehold title and secondly a freehold title. Many people know that Indonesian regulation and law allows foreigners to purchase leasehold title, but not freehold title/rights. It’s not surprising because people always relate freehold rights to Hak Milik.   Yes, you can refer to Hak Milik as synonymous with freehold rights. However, the freehold rights are not only Hak Milik. There are other titles that are included in the freehold title category that foreigners are still eligible to obtain though a valid company structure.   What’s the Definition of Freehold Property? Let’s have a look at the definition of freehold property so that you have a better understanding of it. Freehold property we can define as any property that is “free from hold” from external claims apart from the rightful title owner.   The holder of a freehold title for the property has full authority to use the property for any purpose, as long as the owner still obeys the local restrictions applied in the area, they reside in.   The selling process of freehold property needs less paperwork and the state’s approval isn’t required. But freehold property is more costly than leasehold properties.   Property titles that are categorized as freehold titles such as Hak Milik, Hak Guna Bangunan, and Hak Pakai. As a reminder, foreigners can’t own property in Indonesia through Hak Milik.   However, foreigners are still able to have these titles through:  •    Hak Guna Bangunan (HGB) – available for PT. PMA only.•    Hak Pakai (HP) – available for non-Indonesian individuals and PT. PMA.   You can learn briefly about 7 property rights in Indonesia here!   The Pros and Cons of Freehold Title Here are the pros and cons of this title for foreigners:   1. Pros of Freehold Title Ownerships  •    Need less paperwork or documents  •    Easier to sell his title  •    If the title holder has freehold land, it’s simpler to get a bank loan and renewal •    Freehold land has more promising capital growth and runs at a steady incline each year    2. Cons of Freehold Title Ownerships •    This title is more costly than a leasehold title. •    Down payments will naturally be more due to the significant price difference from lease to freehold title ownership.   If you’re a non-Indonesian individual who wants to have an HP title or PT. PMA who have decided to buy this title through HP or HGB in Indonesia, asking for help from a lawyer or notary about the regulation applied is recommended and necessary to make sure that you follow the structures and rules.   The Choice is Yours! There are many reasons why people want to have a freehold title in Indonesia. As a non-Indonesian citizen, you can have property titles through HP. For PT. PMA companies, can have property titles through HP or HGB.   To find out more on the ownership laws, how to obtain these titles and the structures involved, contact BVR Legal to assist.   There are a few requirements needed to be able to purchase under a few of these titles and here at BVR Legal we able to run you through a smooth understanding of how this could be possible for you.

Acquiring property rights in Bali is quite complex. There are a few property regulations and procedures that we will explain here in order to help you understand how to buy property in Bali.    Let’s go through it with you step by step.   Property Rights Foreigners Can Have or Own in Bali When you’ve decided to purchase a property in Bali, it’s crucial to know and understand what property rights/titles you’re able to obtain in Bali as a foreigner. Knowing this regulation helps you to make property-buying process easier.   When foreigners want to start their property investment journey in Bali, a question like “How to buy property in Bali?” often comes up.   First thing, please note that not all property titles in Indonesia are available to foreigners.    Here are the property titles that foreigners can look for, whether for non-Indonesian individuals or PT. PMA company set-ups:   1. Non-Indonesian Individuals •    Leasehold title – Hak Sewa Bangunan (HSB)•    Hak Pakai (HP)•    Hak Milik atas Satuan Rumah Susun (HMSRS)   2. PT. PMA •    Hak Pakai (HP)•    Hak Guna Bangunan (HGB)•    Leasehold title – Hak Sewa Bangunan (HSB)•    Hak Guna Usaha (HGU)•    Hak Milik atas Satuan Rumah Susun (HMSRS)   Buying property rights through a foreign-owned company (PT. PMA) grants you more rights to property for foreigners and generally seen as a much more concrete option.    However, whether you buy as an individual or through PT. PMA, just to make sure you follow these steps below in order to make your buying property process as smooth as butter.   How to Buy Property in Bali? (Step by step) No matter which property rights you choose to own, here are the steps on how to buy property in Bali:   1. Property Law in Bali The first step in the property-buying process is comprehending how to buy property in Bali by understanding the property law that applies.   It’s helpful for you to know what property titles you can buy in the Land of Gods. As a part of Indonesia, the regulations in Bali refer to Agrarian Law (Hukum Agraria).   According to the Agrarian Law, foreigners can safely and lawfully buy certain property titles in Bali. Finding out the property regulations is the first advisable step for you in order to know the next steps you should take.   2. Establish Your PT. PMA (Optional step) If you want to buy a property in Bali as a non-Indonesian foreigner that doesn’t require a PT. PMA, you can skip this step and go to step 3.   However, if you want broader options for property rights or if the property rights you seek necessitate PT. PMA, establishing a valid PT. PMA can be a good decision for you.   You have an option to establish your PT. PMA through a reputable government institution that is responsible for this setup. The institution is the Indonesian Investment Coordinating Board (BKPM). Alternatively, you can seek help through an agency to facilitate the PT. PMA set up process.   3. Find a Dream Property to Buy After you understand the property regulations, the next step is finding a dream property in your desired location. Here, you’ll do research on properties available in Bali – location, price, amenities, and size.   Best to already know what it is you looking for as Bali has a wide and abundant variety of properties available.   You can choose the property that’s most suitable for your:   •    Your “why” of having a property in Bali. Is your “why” driven by lifestyle, investment goals, or residential purposes in Bali? •    What type of property do you want? Whether it’s land, villa, or apartment developments.   After you have your answers, then you can learn how to buy property in Bali and choose the property you want.   Sometimes, doing research can be time-consuming. The easiest way for this step is to collaborate with a trustworthy property agency in Bali. There, you can access property listings effortlessly.   4. Complete the Property Due Diligence Report Completing the Property Due Diligence Report is necessary after you decide which property you want to have.   A appointed notary will be responsible to ensure that all the paperwork that’s provided are valid and that there are no incumbrances when it comes to transferring the rights or lease to the new owners.   We can say, this is the most vital step for you to do.   This process assures that you are safe, and that there are very little risk involved, also any and all property scams.   Working with a trustworthy and reputable property agency in Bali is vital. They can streamline the process and make sure all the necessary documentation is in place upon signing a Letter of Intent, Offer to Purchase or MOU.   The agency will have these documents on hand in order to make the process a little easier, so this is where a professional real estate company’s assistance makes a big difference.   After the request is completed and all the documents are provided, you can negotiate regarding the contract duration and price.   Here, you can use professional assistance from a property agency to make the process smooth.   5. Sign and Offer Agreement/MOU and Transfer a Down Payment After you’ve negotiated the terms and conditions on the property, land, and a valid offer, MOU or letter of intent has been signed by all parties.   A general rule of thumb will be that a 10% deposit is paid to your chosen notary bank account to hold the property while the due diligence is being completed.   Your next step is waiting for the due diligence “clear” report from your notary. The next step is signing the Sales Purchase Agreement – a legal document that attaches your and the landlord’s responsibilities in the property transaction.   The Sales Purchase Agreement requires the signatures both from you (buyer) and the property owner (seller), in the presence of an authorized public notary for the area (PPAT).   6. Pay the Remaining Payment After the certificate is acquired and verified by PPAT, you can finalize the payment and sign the Deed (sales and purchases agreement). The signing process must be done with the presence of a public notary.   7. Sign the Transfer Leases or Deed Transfer The property-buying process is almost done! This is the final step in understanding how to buy property in Bali.   In this step, you’ll sign the transfer leases (for leasehold rights) or the deed transfer will take place from the previous titles owner (for Hak Milik, HGB, and Hak Pakai).   After that, you’re officially obtain the property rights on your title.   We Make the Process Simple for You! Owning a slice of paradise is a simple and effortless if you understand on how to buy property in Bali. Additionally, work with the right agency to help streamline the entire experience.   Let us help you make the best and most informed decisions, run through the process and help you with your Bali property dreams.   Contact us for more information!

Buying a property in Indonesia, especially Bali, is really promising because of its potential to yield a high ROI. However, it’s crucial to understand land or property rights in Indonesia that are applied and the property buying process. You need to pay attention to these aspects if you’re considering property investment in Bali.   In this article, we’ll dive into property rights in Indonesia – covering its definition, the acquisition process, and the advantages you’ll have if you have the title.   An Insight: Property Rights in Indonesia   Let’s get “brief” insights about property rights in Indonesia before we deep dive and learn each type of them.   So, what is the definition of property rights?   Property rights, or property ownerships, refer to the legal ownership and control over the property. The owners of the property can be individuals, governments, and corporations.   There are so many kinds of property and it has a broad scope concept. As a result, legal protection for every property can be significantly different between jurisdictions.   But, in this article, we’ll discuss real estate objects' perspective – villas, hotels, lands, houses, and apartments.   Property ownership lets the owners have privileges on their properties – selling, renting, leasing, or generating profits.   Property rights in Indonesia are regulated by the Agrarian Law (Hukum Agraria). This law came from customary laws (Hukum Adat) that had been applied at the rural level for hundreds of years and then modified by Dutch colonial.   The Agrarian Law that applies in Indonesia is still considering concepts under customary laws (Hukum Adat).   In addition to this law, Chair of the National Land Agency (Badan Pertahanan Nasional) or the State Ministry of Agrarian (Kementerian Agraria dan Tata Ruang) also issues other property ownership regulations in this country.   These rules govern the property buying process in Indonesia. Whether you’re local or foreigner, you must know and stick to these rules in order to ensure a smooth property buying process experience.     7 Property Rights in Indonesia   There are seven property rights in Indonesia, each accompanied by a specific purpose.   If you’re a non-Indonesian who wants to have a property in Indonesia, please be aware of the restrictions that apply to the property ownership eligibility.   Let’s familiarize yourself with them!     1. Hak Milik (HM)   Hak Milik in Indonesia lets you have full ownership of land. As of today, only Indonesian citizens can acquire the rights – either buying from individual ownership, company ownership, or state-owned land. This title is one of the rights included in the freehold rights category.   Individually-owned land can vary from certified to even uncertified lands such as Girik, Letter C, or Eigendom Verponding which are usually owned in rural villages.   Furthermore, the property and land rights can be different – in this scenario, they might have different owners.   Lastly, if you are an Indonesian citizen, you can upgrade any land rights, both certified or uncertified, into freehold rights by registering with the Badan Pertanahan Nasional (BPN). Hak Milik is the only rights that don’t have time restrictions regarding their ownership.     2. Hak Sewa Bangunan (HSB) – Leasehold rights   Leasehold rights gives you the right to rent or lease a property. Foreigner citizens have a chance to have leasehold rights – both individuals and PT. PMA in Indonesia.   Indonesian citizens can lease their properties through their freehold title or Hak Milik. Whereas, PT. PMA can lease their properties through Hak Guna Bangunan.   If you’ve got a leasehold title on your property as an individual, you’re able to rent your property to generate income.   The requirement is really simple. You only need your passport to obtain the leasehold title if you’re a foreigner and an ID card (KTP) if you’re an Indonesian.   You’re allowed to have leasehold rights for 30 to 80 years with an option to extend.   Want to know more about leasehold title and start generating income? Learn about leasehold title here!     3. Hak Pakai (HP) – Right to use title   In addition to leasehold title, as a foreign citizen, you also have a right to own Hak Pakai in Indonesia. However, this type of property only allows you to use the property for residential purposes, not for generating income (rent to someone else). Hak Pakai is included in the freehold rights category.   You need to prepare your second home visa, KITAS, or KITAP, and BPN’s form to apply for Hak Pakai ownership.   If you decide to have a holiday home, retirement plan, or planning to move to Indonesia, this land rights is fitting for you.   The duration of Hak Pakai ownership over land with Hak Milik is 25 years and can’t be extended. However, if the Hak Pakai and Hak Milik holders agree to have an extension option, it’s possible to extend Hak Pakai ownership.   The maximum validity period of Hak Pakai is 70 years – 45 years duration agreement up with 25 years of extension. The new Hak Pakai certificate is released by Pejabat Pembuat Akta Tanah.     4. Hak Guna Bangunan (HGB) – Right to build title   Hak Guna Bangunan permits the title owner to possess a building on land that is owned by another individual. Only Indonesian citizens and legal entities (PT. PMA) can have this property right. Hak Guna Bangunan is included in the freehold rights category.   The owner of Hak Guna Bangunan can use the building for commercial or residential purposes. However, additional requirements are needed when the title holders want to use the building for commercial purposes.   As we discussed earlier, Indonesian owners can upgrade their Hak Guna Bangunan ownership to freehold title by acquiring both the land and property above it and registering to BPN. Furthermore, when the freehold rights are acquired, the owner is entitled to inherit, sell, and lease the land and property.   Similar to freehold title, Hak Guna Bangunan title owners are also able to inherit or sell their HGB title and buy HGB title from someone else.   You can have Hak Guna Bangunan for 80 years – 30 years for the first contract, then you can extend the duration for 20 years for the first extension and 30 years for the next extension.     5. Hak Guna Usaha (HGU) – Right to cultivate title   Hak Guna Usaha only allows the utilization of land for agricultural, fisheries, or livestock purposes and the minimum land area is 5 hectares.   However, capital investment with a good company setting is needed if the land area is more than 25 hectares.   There’s a restriction for non-Indonesian individuals to obtain this property title. This property right is exclusively for Indonesian citizens and PT. PMA.   The contract duration for Hak Guna Usaha is 25 years – for companies that need a longer time, the duration is 35 years. If the contract expires, the extension is available for the next 25 years.     6. Hak Pengelolaan (SHPL) – Right to manage   Hak Pengelolaan is the most restrictive property right in Indonesia. This title is specifically designated for government agencies, state-owned enterprises (BUMN), regional-owned enterprises (BUMD), and government legal entities to manage the land.   The duration of Hak Pengelolaan can vary depending on the written agreement in the contract.   What are the authorities of Hak Pengelolaan holders? • Planning the use of the land.• Utilizing the land in order to carry the holder’s responsibilities.• Transferring parts of the land to the third party as per the requirements of Hak Pengelolaan holder – conditions related to the land designation, utilization, duration, and compensation with the allocation of the land rights to the third party by government legal entities based on the regulations.     7. Hak Milik atas Satuan Rumah Susun (HMSRS) – Strata title   HMSRS or Strata title allows the owner to own a unit in multi-story building.   HMSRS provides you an ownership only over the unit, not the land as well. The land ownership is under Hak Pakai title or Hak Guna Bangunan title.   If you’re a foreigner who wants to have strata title, you need KITAS or KITAP. You’re allowed to have only one unit in one residential building.   Please note that not all residential buildings in Indonesia have ‘strata title’ classification. You must ensure the building is eligible for you.   Also, there are limitations for foreigners who want to have HMSRS, including minimum unit price, land area, number of units, and unit utilization (for residential purposes only).   What about HMSRS duration? The contract duration depends on the land title where the units are built.   If the land title is HGB, the HMSRS duration will follow the HGB duration. For instance, if the HGB duration is 20 years, the HMSRS duration will be 20 years as well.   However, the HMSRS duration on land with Hak Pakai title is different. The maximum duration is 25 years with an extension option for another 25 years.   Additional information, the maximum area that foreigners can own within a multi-story building is 49% and the remaining units must be owned by Indonesian citizens.   If you’re interested in living in Indonesia, this title is good for you.     Property Rights in Indonesia You Can Have as a Foreigner   Here’s a quick recap of property rights you can have in Indonesia as a non-Indonesia individual, legal entity (PT. PMA), and Indonesian citizen.      Are You Ready to Own Property Rights in Indonesia?   The Indonesian government allows foreigners to access property rights in Indonesia in several ways. Typically, foreigners buy accessible rights through PT. PMA, as this way offers more property rights ownership compared to non-Indonesia individuals.   However, non-Indonesian individuals can still generate income in Indonesia through a property right like leasehold title. Regardless of your way to start acquiring property in Indonesia, collaborating with a trustworthy property agency is recommended to ensure a smooth property buying process.